Recent developments in the employment protection law (EPL) literature have revealed that changing the stringency of employment protection can lead to far-reaching consequences outside the labor market by affecting firms' production decisions or worker engagement levels. This paper provides the first empirical evaluation of the comprehensive effect of restrictions on firing employees in Japan by exploiting the variations in court rulings. The views expressed in the articles are solely those of the author(s) and do not represent the views of the Research Institute of Economy, Trade and Industry.
The consequences of employment protection legislation (EPL) are one of the essential issues that. Similarly, Autor, Donohue, and Schwab (2006) examined the effect of the “implied contract” exception on the employment-at-will doctrine. For example, Saint-Paul (2002) showed that a high-fire economy. cost tends to specialize in improving existing processes rather than brand development. new products.9 A reduction in incentives for investment in R&D can reduce the productivity levels of firms. In summary, the direction of the impact on productivity is theoretically unknown.
10 Koning (2003) uses information on layoffs relating to soccer coaches in the Dutch Premier League and shows that layoffs indirectly stimulate the rest of the workforce. A special feature of Japanese employment protection is the effect of judicial control over it. 12 Regarding the second precondition mentioned above, for example, the "scope" of the employment contract is one of the disputed issues.
Before describing our methodology, it will be useful to present a brief summary.
Methodology
The Basic Firm Survey is a census that includes all firms in the manufacturing, commercial and mining sectors with 50 or more employees and at least ¥30 million in start-up capital. It differs from other studies in that it contains details about. financial and personnel information of companies.15. This is impossible with panel data. chain output and input indices over time and obtain cross-sectional comparisons between firms.
Comparisons of individual companies are made in relation to this hypothetical company or to the industry's opinion. 1997) then chain the hypothetical firms. 15 The basic business survey is conducted by the Ministry of Economy, Trade and Industry (METI) of the Japanese government. In the Indian case of Besley and Burgess (2004), the state-specific changes accumulated to the Indian Industrial Relations Act, a written law.
We have two major concerns with the causal identification of β₁ in equation (1). social and economic conditions in local areas, endogeneity is a serious problem. 2003). analyzed a detailed data set concerning an Italian bank to show that judges actually express .. disproportionate leniency towards workers in judgments when the local labor market is in a depression. 20 Okudaira (2008) shows that the OLS results remain the same even in the IV estimations. economic conditions at the proxy prefecture level. Thus, we cannot rule out endogeneity in companies' decisions to enter or move locations before 1994.
Results
23 To account for firm size, we also performed a similar analysis for the change in the investment-to-sales ratio (I/Y) and obtained the same results. Comparing panel A with panels B and C, we find that our baseline results are robust enough to relax. Then, the ratio of the workers' victory of prefecture p in year t to the precedents in the last 3.
Because our results are not sensitive to the alternative definition of CV, we conclude that validity is flawed.
Conclusion
Our results show that the employment protection effect is ubiquitous in Japan, even outside of Japan.
Appendix: Construction of the TFP
Intermediate inputs (X): For the trading sector, intermediate inputs are calculated as (cost of turnover + operating costs) - (wages + depreciation costs + expenses for purchased materials). Labor Input (X): As with labor input, we multiplied the total number of employees of each company by. Using this data, we calculated the net capital stock of company i in sector j constant.
Author Affiliations
- Firm Characteristics
- Industry Characteristics
- Prefecture Characteristics
- Common Characteristics
- Alternative definition
- Restricting the sample to firms that did not relocate their headquarters to other prefectures
Kaiko Kisei no Ho to Keizai (Law and Economics of Employment. Protection)', Tokyo: Nihon Hyoronsya Press. Note: Tokyo (No. 13) and Osaka (No. 27) account for 48% of the total cases, and different vertical scales are used for these two prefectures. All estimates except the controls in column (5) for prefecture characteristics (record of public investment, indicator variables for left-wing governor and governor of the Ministry of Internal Affairs and Communications, index of trade union organization, job/applicant ratio, uncertainty in gross product), distribution index and the Herfindahl-Hirschman index.
All estimation controls for prefecture characteristics (log public investment, indicator variables for left-wing governor and governor from the Ministry of Internal Affairs and Communications, union index, job-to-applicant ratio, gross product uncertainty), diffusion index, and Herfindahl-Hirschman index. All estimation controls for the same set of control variables used in the baseline specifications in Tables 3 and 4, except that we exclude 'proportion of part-time workers' from our list of controls in Panel C. Note: In Panel A, each cell shows the estimated coefficient of the relationship between Labor's victory in the last 3 years from a separate regression.
All estimations were performed for the same set of control variables used in the basic specifications in Tables 3 and 4, except that we had to drop the left governor dummy, the M IAC governor dummy, and the union index from row II of panel B due to collinearity.
